Affinity Financial Corp. v. AARP Financial, Inc. (U.S. District Court, .D.C.)
In a dispute over a contract in which Affinity Financial agreed to provide financial services to AARP members, both parties entered into binding arbitration proceedings pursuant to the terms of the contract. The arbitration Panel held that it was difficult to pinpoint the moment when any one party “crossed the line and breached the Agreement when the other party was not in breach” and found that “one could readily conclude that both parties were in default during various points during the life of the contract.” The arbitration panel concluded that, in calculating the total amount of damages, the fair result would be for Affinity to recover “some portion of the money expended by Affinity in getting its planned program up and running” in reliance on the contract. The arbitrators ultimately awarded a total of $2.75 million in damages to the petitioners. Both Parties then filed respective motions in federal district court to confirm and to vacate the arbitration award. Both parties also sought an award of reasonable attorneys’ fees.
AARP contended that the award should be vacated because the arbitration panel exceeded its powers and manifestly disregarded the law. The district court disagreed. In confirming the award, the court held that since the service agreement granted the arbitrators the wide discretion to “fashion appropriate relief when the circumstances warrant doing so,” the arbitration panel was empowered to make the award.
In regard to the contention that the arbitration panel manifestly disregarded of the law, AARP argued that the arbitrators did so by (1) ignoring the governing rule that a breaching party may generally not recover against a non-breaching party, (2) by awarding damages that were excessive in light of the contract’s prohibitions on certain types of damages and (3) by failing to explain its award of damages. The court found that the first argument ignores the arbitration panel’s finding that AARP is not a non-breaching party. In regard to the second contention, the court held that AARP’s dissatisfaction with the arbitration panel’s imposition of damages is insufficient to require vacatur of the award. Lastly, the court held that the final argument fails because the arbitration panel is under no obligation to provide an explanation of its award and the failure to do so cannot constitute a manifest disregard of the law. The court also granted Affinity leave to file a motion for an award of reasonable attorneys’ fees.
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